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Economic Sense

RSS By: Matt Bogard,

Matt's primary interest is in the biotech industry and ag policy.

The Mystery of Capital ( and the Clean Water Restoration Act)

Sep 06, 2009

By Matt Bogard

Back in 2002 Economist Walter Williams wrote a review (link) of a book entitled 'The Mystery of Capital.

The following is an excerpt from that review:

"It takes 168 steps and 13 to 25 years to gain a formal title to urban property in the Philippines; 77 steps and 6 to 14 years to do the same in the desert lands in Egypt; and 111 steps and 19 years in Haiti. If you wanted to open a one-worker garment shop legally in Lima, Peru, it would take you 289 days, working 6 hours a day, to obtain the business license."

The main point of the book 'The Mystery of Capital' by Hernando de Soto is that one reason many countries have not prospered from capitalism is not because they were exploited by Europeans, or because they are currently being exploited by multinational Western corporations. The reasons have more to do with institutional arrangements that fail to recognize or protect property rights and a burdensome regulatory environment.

Compare this to some information reported in a recent AgWeb News post entitled 'Producers Testify on Burdensome Implications of Clean Water Restoration Act':

"The federal government is already struggling to handle a backlog of 15,000 to 20,000 existing section 404 permit requests. According to the U.S. Supreme Court, the average applicant for an individual Clean Water Act permit spends 788 days and $271,596 in complying with the current process, and the average applicant for a nationwide permit currently spends 313 days and $28,915 - not counting the substantial costs of mitigation or design changes (Rapanos, 447 U.S. at 719, plurality opinion). Considering U.S. farmers and ranchers own and manage approximately 666.4 million acres of the 1.938 billion acres of the contiguous U.S. land mass, the massive new permitting requirements under this Act would be an unmanageable burden for the government, and could literally bring farming operations to a standstill."

"Chilton shared from personal experience about a time his family ranch had to apply for a 404 permit to construct a road across a dry wash on their private property. The regulatory approval process took over a year and cost his family nearly $40,000."

In past posts I have expressed a lot of concern about the effects of the regulatory environment on stifling innovation and production in agriculture. This is just another illustration of the impact of government controls on individuals and specifically the agriculture industry. Often the results could lead to worse environmental consequences than those the regulations intend to prevent, and also could lead to producer losses. We don't want our industry to end up like the financial or auto industry, and worse, we don't want to operate in a regulatory environment edging closer and closer to the standards of developing countries. Unfortunately many policy makers have more to gain from special interests and ideological victories than sound policies.

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